Ecuador Banking Board Resolution No. JB-2015-3516

Banking Board of Ecuador

RESOLUTION No. JB-2015-3516

THE BANKING BOARD

CONSIDERING:

THAT the First Transitional Provision of the Organic Monetary and Financial Code, published in Official Register Second Supplement No. 332, on September 12, 2014, establishes that resolutions recorded in the Codification of Resolutions of the Superintendencia de Bancos y Seguros and the Banking Board, as well as norms issued by control bodies, will remain in force to the extent they do not conflict with the Organic Monetary and Financial Code, until the Monetary and Financial Policy and Regulation Board resolves as appropriate in each case; and, with the second paragraph of the Third Transitional Provision, which states that the Banking Board will continue to act until it resolves all claims, appeals, and other administrative procedures it was handling as of the effective date of said Code, within a period of one hundred and eighty days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board; extension granted for an additional 180 days, via Resolution of the Monetary and Financial Policy and Regulation Board No. 054-2015-F, dated March 5, 2015;

THAT Mr. David Segovia Naranjo filed a claim against Banco Pichincha C.A., primarily asserting that in October 2010 he opened an account named e-generación, which corresponded to a bank promotion in which he was issued a Visa Premium card with an authorized limit of five hundred dollars; that through bank notification he learned he had an overdraft in his account, with the most serious issue being that he neither requested nor authorized this situation with his signature, and when he went to claim it, they stated that because he was a good payer, the Collections Department authorized said payments. That on November 8, 2010, he filed his claim with the bank for having overdrawn his account by 400%, as he believed it was an illegal procedure, since in a certain way he was being required to pay the bank a debt that was not his and from which he would draw 3,500 dollars that had to be covered due to the irresponsibility of certain bank employees;

THAT Banco Pichincha C.A. via letter BP-ACEC-2012-0321 dated May 3, 2012, signed by Tatiana Vergara Carrera, authorized signatory of Banco Pichincha C.A., in response to letter DNAE-SAU-2012-1167 dated April 4, 2012, informed:

"(...) regarding the claim filed by Mr. DAVID SEGOVIA NARANJO with identity card No. 1719730234, for disagreement regarding the consumption recorded in his credit card statement No. 4500810000165273, we inform you that our institution, complying with the provisions of International Franchise, requested documentation from the establishment supporting the billed transactions and, due to not receiving from the merchant the documents backing the transaction, on December 15, 2011, the amount of US $4,017.00 was credited to said card at the establishment's expense; this amount was reflected in the statement issued in December 2010

---

Banking Board of Ecuador Resolution No. JB-2015-3516 Page No. 2

(sic)." In this regard, Banco Pichincha C.A. proceeded to credit the Visa Pichincha card No. 4514320001020034 with the value of the claimed transactions by Mr. David Segovia Naranjo, as it lacked supporting documents (charge notes) to hold and charge the cardholder;

THAT the Subdirection of User Attention, through letter No. DNAE-SAU-2012-5937 dated October 9, 2012, resolved the claim primarily indicating:

"From the information in the case file, it is clear that although values for unrecognized transactions were charged, the financial institution subsequently reversed them, a situation reflected in the corresponding statements."

"For the foregoing and since there is no evidence that Banco Pichincha C.A. incurred omissions in applying its manuals, policies, and procedures, the claim filed is declared non-procedent and the present administrative process is concluded.";

THAT Mr. David Segovia Naranjo, via a document filed with this Superintendencia on October 23, 2012, filed an appeal for review before the Banking Board against letter DNAE-SAU-2012-5937 dated October 9, 2012;

THAT the Banking Board, via resolution JB-2014-2861 dated April 3, 2014, primarily analyzed and resolved as follows:

"THAT indeed to the Visa World Card No. 4500810000165273, Banco Pichincha C.A. charged the amount of US $4,927.62 for a stolen card whose payment is spread over sixty months, which evidences that the bank incorrectly transferred the claimed transactions to another card, whose holder is also Mr. David Segovia Naranjo, which contradicts the bank's decision adopted via letter No. BP-ACEC-2012-0321, dated May 3, 2012, in which Banco Pichincha C.A., lacking credit notes, proceeded to credit the claimed values (...)

THAT in the case at hand, it is evident from the statement of Visa World Card No. 4500810000165273 that Banco Pichincha C.A. incurred an incorrect procedure by transferring to said card the value of transactions that were initially charged to the Visa Premium International Card No. 4514320001020034 without supporting charge notes (...)

RESOLVES

SINGLE ARTICLE.- ACCEPT the claim contained in the appeal for review filed by Mr. David Segovia Naranjo; and, consequently, DECLARE WITHOUT EFFECT letter No. DNAE-SAU-2012-5937,

---

Banking Board of Ecuador Resolution No. JB-2015-3516 Page No. 3

dated October 9, 2012...; and, consequently, ORDER Banco Pichincha C.A. to fully refund the values paid by Mr. David Segovia Naranjo reported on Visa World Card No. 4500810000165273, of which he is the holder";

THAT, via memorandum No. JB-2014-250 dated April 10, 2014, addressed to the National Superintendent of Private Financial Sector, the Secretary of the Banking Board indicates:

"It is my duty to bring to your attention that the Banking Board, in a session held on the 3rd of this month, when addressing agenda item 10.1 'Knowledge and decision on the appeal for review filed by Mr. David Segovia Naranjo against the administrative act contained in letter DNAE-SAU-2012-5937, dated October 9, 2012, within the claim maintained by said party against Banco Pichincha C.A., while accepting the claim in the appeal filed by the appellant, ordered that the National Superintendent under her charge impose a fine on Banco Pichincha C.A. for the incorrect behavior observed when transferring to another credit card values that were initially charged to Visa Premium International Card No. 4514320001020034 without the charge note and on which the bank, in communication No. BP-ACEC-2012-0321 dated May 3, 2012, stated it would not hold the client responsible.";

THAT in compliance with the aforementioned Banking Board provision, the National Superintendent of Private Financial Sector via letter No. INSFPR-D1-2014-0804 dated May 8, 2014, imposed a monetary sanction of USD $1,000.00 on the Deputy President of Banco Pichincha based on Art. 134 of the General Law of Financial System Institutions, in force at that time;

THAT Banco Pichincha C.A. via communication filed with this Superintendencia on May 19, 2014, filed an appeal for reconsideration against letter No. INSFPR-D1-2014-0804 dated May 8, 2014, which was rejected by the National Superintendent of Private Financial Sector via letter No. INSFPR-D1-2014-1288 dated July 29, 2014, in which the monetary sanction imposed in the appealed letter was ratified;

THAT Banco Pichincha C.A. via a document presented on August 6, 2014, filed an appeal for review before the Banking Board against letter No. INSFPR-D1-2014-1288 dated July 29, 2014, primarily arguing that there was a lack of motivation in the appealed administrative act; that at the first administrative instance, the control body did not find an incorrect procedure by the bank; and that Art. 134 of the General Law of Financial System Institutions only provides for a sanction in case financial entities infringe laws or regulations or contravene instructions issued by the Superintendencia;

---

Banking Board of Ecuador Resolution No. JB-2015-3516 Page No. 4

THAT the Banking Board via resolution No. JB-2015-3374 dated April 22, 2015, after respective analysis, resolved to reject the claim contained in the appeal for review presented by Banco Pichincha C.A.; and, consequently, confirm the administrative act contained in letter No. INSFPR-D1-2014-1288 dated July 29, 2014. It analyzed in the aforementioned resolution, primarily:

"That regarding the appellant's argument that there was a lack of motivation in the appealed administrative act, it must be noted that the monetary sanction to the Deputy President of Banco Pichincha C.A. was imposed based on Article 134 of the General Law of Financial System Institutions, in force at that date, due to the bank's incorrect procedure when transferring to another credit card belonging to Mr. David Segovia Naranjo the values that were initially charged to Visa Premium International Card No. 4514320001020034 without the charge note and on which the bank, in communication No. BP-ACEC-2012-0321 dated May 3, 2012, stated it would not hold the client responsible. Therefore, the fine imposed by the National Superintendent of Private Financial Sector on the Deputy President of Banco Pichincha is duly justified and does not contravene Art. 76 of the Constitution of the Republic.

That regarding the appellant's argument that at the first administrative instance the control body did not find an incorrect procedure by the bank, it must be noted that the administrative act referenced by the appellant, contained in letter No. DNAE-SAU-2012-5937 dated October 9, 2012, became without effect when the Banking Board issued resolution No. JB-2014-2861 dated April 3, 2014, in whose analysis the bank's incorrect procedure was observed, when transferring to another credit card belonging to Mr. David Segovia Naranjo the values that were initially charged to Visa Premium International Card No. 4514320001020034 without the charge note and on which the bank, in communication No. BP-ACEC-2012-0321 dated May 3, 2012, stated it would not hold the client responsible. Therefore, the administrative act issued at first instance by the Subdirection of User Attention lost its legal effects, as it was left without effect by the Banking Board upon accepting an appeal for review filed against the content of said letter.

That regarding the appellant's argument that Article 134 of the General Law of Financial System Institutions, in force at that date, only provides for a sanction in case financial entities infringe laws or regulations or contravene instructions issued by the Superintendencia, it is important to transcribe the relevant part of said legal body, whose text states:

'Art. 134.- When in a financial system institution its directors, administrators, officials, or employees infringe laws or regulations governing their operation and said laws or regulations do not establish a special sanction, or in cases where they contravene instructions issued by the Superintendencia, it will impose a sanction according to the gravity of the infringement, which shall not be less than 50 UVCs and will not exceed 3,000 UVCs. (...)'

THAT in the present case, Banco Pichincha, by charging values that lacked supporting evidence of an obligation, transferring the value of claimed transactions to another credit card belonging to Mr. David Segovia Naranjo, did indeed incur a non-compliance with the regulations in force at the time, as numeral 12.2 of Article 12, Chapter IV 'Code of Rights of Users of the Financial System', Title XX 'Superintendencia de Bancos y Seguros', Book I 'General Norms for Financial System Institutions' of the Codification of Resolutions of the Superintendencia de Bancos and the Banking Board, established that the user has the right to have financial system entities proceed to 'Reject and not pay products that have not been expressly requested by the financial system user (...)'. Therefore, in this case, the National Superintendent of Private Financial Sector correctly applied Article 134 of the General Law of Financial System Institutions in the administrative act by which a monetary sanction was imposed on the Deputy President of Banco Pichincha C.A.";

THAT Banco Pichincha C.A. via a document presented on May 28, 2015, filed an appeal for reconsideration against the indicated administrative act, contained in Resolution JB-2015-3374 dated April 22, 2015, notified by letter of May 19, 2015, and received on the 21st of the same month and year. It requests that the indicated administrative act be revoked, arguing:

That in the indicated resolution it is stated verbatim: "THAT regarding the appellant's argument that there was a lack of motivation in the appealed administrative act, it must be noted that the monetary sanction to the Deputy President of Banco Pichincha C.A. was imposed based on Article 134 of the General Law of Financial System Institutions, in force at that date, due to the bank's incorrect procedure when transferring to another credit card belonging to Mr. David Segovia Naranjo the values that were initially charged to Visa Premium International Card No. 4514320001020034 without the charge note and on which the bank, in communication No. BP-ACEC-2012-0321 dated May 3, 2012, stated it would not hold the client responsible." It affirms that the Control Body did not consider the communication regarding Mr. Segovia Naranjo's case, filed by his representative on May 28, 2014, at 14:45:48, with file number SBSUIO-2014-35641 (as shown in the corresponding reception stamp), to which a copy of the communication addressed on February 22, 2011, to "VISA INTERDIN" signed by Mr. David Ricardo Segovia Naranjo was known to be attached, through which the client freely and voluntarily assumed the pending payment values and requested to transfer his entire debt maintained in credit card VISA BANCO PICHINCHA No.

---

Banking Board of Ecuador Resolution No. JB-2015-3516 Page No. 6

4514320001020034, to his credit card VISA INTERDIN No. 4500810000165273.

It reiterates the grounds exposed through the appeal for review by which the administrative act contained in letter No. INSFPR-D1.2014-1288 was challenged, requesting that for the issuance of the corresponding resolution, the irrefutable evidence referenced in the preceding numeral be primarily analyzed and considered;

THAT regarding the bank's first argument, it is considered that on May 28, 2014, a communication from Banco Pichincha C.A. addressed to the Secretary of the Banking Board is on record, indicating that with reference to letter JB-2014-1100 dated May 6, 2014, through which they are notified that their appeal for reconsideration filed before the Banking Board has been accepted for processing, by which they challenged resolution JB-2014-2861, according to Art. 21, Chapter II, Title XVI, Book I of the Codification of Resolutions of the Superintendencia de Bancos y Seguros, they attach a copy of the communication addressed on February 22, 2011, to "VISA INTERDIN" signed by David Segovia, through which the client assumed the pending payment values and requested to transfer his entire debt maintained in VISA BANCO PICHINCHA credit card to his VISA INTERDIN credit card; the bank indicates that he even knows that the transferred value has been fully covered;

THAT the communication referenced by the bank, addressed to VISA INTERDIN and signed by Mr. David Segovia, is dated February 22, 2011, and primarily states:

"By means of this and in a free and voluntary manner (sic) I grant my acceptance to VISA INTERDIN card No. 4500810000165273 issued in my favor, and as its holder, I authorize the Issuer to transfer my entire debt that I maintain to date in my VISA BANCO PICHINCHA card No. 4514320001020034. For the values transferred to the aforementioned VISA INTERDIN card, I commit to paying them in full on the dates determined in the corresponding statement";

THAT however, it must be considered that the date of said communication, February 22, 2011, is prior to the date of presentation of the claim by Mr. David Segovia at this Superintendencia (March 9, 2012); and prior to the date of letter No. BP-ACEC-2012-0321, dated May 3 of the same year, signed by Tatiana Vergara Carrera, authorized signatory of Banco Pichincha C.A., in response to letter DNAE-SAU-2012-1167 dated April 4, 2012, through which the bank states:

"(...) regarding the claim filed by Mr. DAVID SEGOVIA NARANJO with identity card No. 1719730234, for disagreement regarding the consumption recorded in his credit card statement No. 4500810000165273, we inform you that our institution, complying with the provisions of International Franchise, requested documentation from the establishment supporting the billed transactions and, due to not receiving from the merchant the documents backing the transaction, on December 15, 2011, the amount of US $4,017.00 was credited to said card at the establishment's expense; this amount was reflected in the statement issued in December 2010 (sic)." In this regard, Banco Pichincha C.A. proceeded to credit the Visa Banco Pichincha card No. 4514320001020034 with the value of the claimed transactions by Mr. David Segovia Naranjo, as it lacked supporting documents (charge notes) to hold and charge the cardholder;

THAT from the foregoing it is evident that, although Mr. David Segovia signed the February 22, 2011 communication authorizing the transfer of his entire debt, which he claimed to hold at that time with VISA INTERDIN card, to the VISA BANCO PICHINCHA card of which he was a holder; subsequently, that is on May 3, 2012, the bank itself determined in its letter BP-ACE-2012-0321 that due to not receiving from the merchant the documents backing the transaction, on December 15, 2011, the amount of US $4,017 was credited to said card at the establishment's expense; that is, the bank determined the lack of documentary backing for the transactions whose values were intended to be charged to the cardholder;

THAT regarding this, the first paragraph of Art. 1726 of the Civil Code establishes:

Acts or contracts containing the delivery promise of a thing worth more than eighty United States dollars shall be in writing;

Article 1483 of the same code establishes:

There can be no obligation without a real and lawful cause; but it is not necessary to express it. Pure liberality or beneficence is a sufficient cause.

Cause is understood as the motive that induces the act or contract; and unlawful cause as that prohibited by law, or contrary to good customs or public order.

Thus, the promise to give something in payment of a non-existent debt lacks cause; and the promise to give something as recompense for a crime or an immoral act has an unlawful cause;

THAT in this case, based on what is indicated by Banco Pichincha C.A. in its letter BP-ACE-2012-0321 dated May 3, 2012, it is evident that there were no documentary foundations to determine Mr. David Segovia's obligations related to his credit card transactions, obligations that had to be in writing through respective charge notes or vouchers signed by the cardholder, to determine their legal existence and lawful cause, in accordance with the aforementioned norms;

THAT since such legal prerequisites were not determined, the authorization for a transfer from one credit card to another of an apparent debt, which lacks documentary evidence, authorization contained in the February 22, 2011 communication signed by David Segovia Naranjo, does not disprove the reason for the sanction imposed on the legal representative of Banco Pichincha C.A. through the now appealed resolution, namely having charged values that lacked supporting evidence of an obligation, transferring the value of claimed transactions to another credit card belonging to Mr. David Segovia Naranjo, failing to comply with the regulations in force at the time, namely numeral 12.2 of Article 12, Chapter IV, Code of Rights of Users of the Financial System, Title XX, Book I, of the Codification of Resolutions of the Superintendencia de Bancos and the Banking Board, which establishes that the user has the right to have financial system entities proceed to "Reject and not pay products that have not been expressly requested by the financial system user;

THAT regarding the bank's second argument, namely that it reiterates the grounds exposed through the appeal for review by which the administrative act contained in letter No. INSFPR-D1.2014-1288 was challenged, it is necessary to consider that according to the first paragraph of Art. 3 of Section I, Chapter II, Title XVI of Book I of the Codification of Resolutions of the Superintendencia de Bancos and the Banking Board, which establishes that the appeal for reconsideration must be based solely on the existence of facts or legal elements not known by the Superintendencia de Bancos y Seguros or the Banking Board at the time of issuing the resolution, whose record, if it existed, could have decisively influenced the direction of the resolution. - In this case, the arguments in which the bank reiterates were subject to the Banking Board's resolution now appealed via appeal for reconsideration, and therefore do not constitute facts or legal elements unknown to the collegiate body at the time of issuing the resolution; and according to the invoked norm, it is not appropriate to base the appeal for reconsideration on such arguments, consequently also not accepting them;

THAT the appellant has not succeeded in legally disproving the grounds that the control body had to impose the sanction subject to challenge;

THAT the Advisor of the General Superintendent, via memorandum IG-2015-174 dated July 2, 2015, recommended to the Banking Board to reject the claim contained in the appeal for reconsideration filed; and,

IN exercise of its legal powers...